What Is My Home Worth?
How real estate experts determine value
Real estate agents specialize in answering the question “what is my home worth?” for their clients, which they do by running a comparative market analysis. This process involves finding similar properties (“comps”) that sold within the past 90 days.
The most accurate comp is a home that’s nearby, similar to yours in square footage, and has the same number of bedrooms and bathrooms. (Ideally, the lot size is also equivalent, but that’s more important in rural areas, where homes are set on multiple acres.) Once your agent finds a few comps, then she averages those figures to come up with a baseline of your own home value.
For instance, “if your neighbor’s home is listed for $100,000 and you want to list yours at $150,000, you’d better be able to clearly explain the difference to prospective buyers.” Or else adjust your number accordingly.
What is my home value to a buyer?
Sellers need to consider how home buyers search for properties online. Let’s assume your home’s fair market value is $503,000. Many people search for homes on the web using $20,000 or $25,000 increments. The upshot? Listing your home for $503,000 could prevent your listing from being seen by buyers who are searching for homes in the $475,000 to $500,000 bracket, so asking for $500,000 might generate more traffic—and maybe even a bidding war to push that final number well above your expectations.
Try to remain objective
Indeed, it’s hard to boil down years or decades of memories in a home to a number. It’s also hard to accept that your home is worth less than what you paid for it, or that you can’t just tack on the full dollar amount of the renovations you’ve made. On average, renovations will reap you only a 64% return on investment, although that varies based on the type of upgrades you’ve made.
Why it’s important to know how much your house is worth
Estimate your home’s value as too high, and it could wind up sitting on the market. That’s a big problem, because a property that goes unsold for an extended period of time (e.g., more than 30 days) often becomes stigmatized.
Pricing your home below market value in an attempt to stir up interest and generate multiple bids can also backfire. Granted, that strategy could work in a hot seller’s market, but under pricing your home frequently leads buyers to assume that your home is worth only its list price.
Your best bet: Know what your home is worth, and list your home close to that figure—aka its market value. When in doubt, turn to your real estate agent to help you cut through the haze and help you pinpoint the right price.